Our view at Treehouse Markets is that the voluntary carbon markets (VCMs) can play a critical complimentary role in scaling and accelerating action to limit global warming to 1.5°C.
This is why we were one of the first companies to sign the letter declaring our commitments to leading organisations to net zero and averting the climate crisis, through signing the endorsement letter set out by the Taskforce on Scaling Voluntary Markets.
Our raison d’etre for joining forces with others through this important group is two-fold. Tackling the climate emergency is the greatest challenge humanity has ever faced. If we are to succeed, we need to work together. There are simply too many obstacles to overcome to try and achieve this in a fragmented way. Public sector, private sector, governments and policy-makers, we all need to unite.
Second, and this is where Treehouse comes in, I believe the lack of trust and transparency in the voluntary carbon markets is simply unsustainable. It is no wonder that many people are suspicious and express concerns about the validity of the carbon credits on the market. I do too. It’s challenging to be able to say with utmost confidence that money invested into carbon offsets is having a genuine impact on the forests, biodiversity, and communities they are designed to protect. The system is not fit for purpose and has to change if we are to be able to use carbon offsets as a valid tool for change.
The good news is, I believe things are about to change. I believe the voluntary carbon market is on the cusp of explosive growth. In early conversations I am having with investors, corporates, financiers, data scientists and forest owners, we are all grappling with the how can we transform this asset class so that it is understood and has the right to be considered trustworthy.
There are many obstacles to overcome. Reflecting on the future and what a global roadmap may look like over the weekend, I realised in some ways, this reminds me of the rapid transformation of the international debt markets. Why? Because both markets are underpinned by the need for transparency and trust.
Let me explain…Twenty-five years I started pitching Eurobonds to “emerging market” governments. At that time, the Eurobond market was working, but not that well understood. It was mainly utilised by western governments, with the greatest depth of liquidity coming from the US.
As more issuers began to utilise the markets, with clearer defined benchmarks and more data points which could be trusted, the breadth and depth of investors jumping into emerging markets grew at pace. Order books with tens of investors, rapidly grew to hundreds.
Let’s not forget, this was all set against a backdrop of multiple crises too. Everything from financial challenges in Asia and Russia to the tech bubble. However, what kept the primary bond market open in the face of all these headwinds was transparency. Issuers engaged with and kept their investors updated and were constantly endeavouring to build their fan base. Not only when they needed to tap the market, but throughout the year. That took time and effort, but it meant access to the markets and issuers were rewarded for that.
Now, bringing this back to the state of play in today’s voluntary carbon markets, I can't help but draw some correlations to what I see now with our race to net zero. Over the past 18 months, institutions have woken up to the issues and are finally making bold and welcome statements announcing their commitments to achieving carbon neutrality within their businesses.
This is all terrific, but I’m just going to say it how I see it. Talk is cheap – for a while! Pretty soon, stakeholders, customers, peers will all want to see genuine action. Not just PR words and arguably, empty promises. Just like two decades ago, those corporations that can describe transparently what exactly they are doing about it and the roadmap they are following to achieve Net Zero, will benefit the most. Those that can't, risk losing creditability and, as a consequence, customers, shareholders, and financial value.
But it cuts both ways and the transparency, quality and depth of data underlying projects has to greatly improve also.
Transparency equals trust.
Even though carbon offsets have been around for two decades, they are still in their nascency as an asset class. They are not yet well understood, let alone utilised confidently by the wider market. They have never really been set up properly, hence their often bad reputation around greenwashing, double counting and so forth.
This must change. This is ultimately why my co-founders and I created Treehouse.
We all agree that the way forward is to reduce our global carbon emissions through switching to cleaner forms of energy, investing in new technologies, improving supply chain efficiencies. But time is not on our side. We will need to also utilise carbon offsets as a tool in this race, but they need to be transparent, credible, and tangible.
My personal goal is to create the AAA equivalent of a carbon credit. Based on solid, transparent, dynamic data that we at Treehouse, will relay to investors in as close to real time as possible. I believe through this transparency we can build trust and through trust we can build the robust and resilient foundations of a market that will give us a valuable tool in our race to net zero that everyone can believe in.
Treehouse Markets is working towards the largest single issuance of high quality carbon credits to date. To be the first to know when the pre-launch registration opens, follow us on LinkedIn or contact me for more information.
